UHF2 realignment study - Ofcom Licensing

240689 - 450-470 Study Final Print
Version (Dec08).doc
Table 15 Cost and Benefit Categories
Cost/Benefit Category Method used to estimate value
Direct costs of aligning the band Use PA Consulting 2004 report estimates, adjusted for
inflation.
Increased risk of service down-time
during alignment
Reduced customer demand during
alignment as customers move to
alternative suppliers
Reduction in Continental Interference
Management costs
Increase in network efficiency as a
result of less interference (i.e. Less base
stations needed)
Greater spectrum efficiency allowing:
• Higher Govt revenues through
further allocations of spare
spectrum
• New/improved services
Standardisation and Harmonisation
benefits
• Lower equipment costs
• New services available (such
as European-wide roaming)
• Adjust PA estimates by UK RPI for 2004-2007
Use PA Consulting 2004 report methodology (adjusted for
inflation)
Use PA Consulting 2004 report methodology (adjusted for
inflation)
The reduction in interference will result in less expenditure in
interference mitigation costs, which will be included in the
network efficiency costs (below).
ADTI/Mott MacDonald modelling of continental inference see
Chapter 6. Account for infrastructure reduction and less
reliance on alternative operator provided services. The
assignments only affected by interference will be considered.
Benefits over 15 years discounted to Net Present Value (based
on a discount rate of 3.5%)
Review of recent spectrum auctions in other markets (where
appropriate) combined with using the equivalent value of
spectrum based on Administrative Incentive Pricing rates..
Estimate revenue per MHz for two service scenarios:
• Narrowband services
• Wideband services
Assume that the value of additional spectrum freed up
through band alignment is a proxy for the total producer and
consumer benefits as a result of spectrum efficiency. No
additional values are estimated for the impact of
new/improved services.
The value of efficiency benefits due to band alignment should
be discounted to take account of the degree of spectrum
efficiency that may occur in any case as a result of spectrum
trading
We assume the key benefits of standardisation and
harmonisation are a 5% reduction in the average cost of a
handset in the case of full band alignment. This is due to
economies of scale of production as a result of full band
alignment. This on the basis that (1) stakeholder interviews
suggested little, if any, demand for services that leveraged
spectrum harmonised with the rest of Europe and (2)
technological progress means non-harmonised/standardised
equipment no longer a major barrier to mass production etc.
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